What do I need to consider when taking out a Family Income Insurance Policy?

We beleive that there are six key issues:

•  How much monthly income do you want the policy to pay?
You need to assess how much monthly income your family would need if you were to die and how much income they would receive from any your pension arrangements, your investments and from state benefits etc. Income from Family Income Benefit Insurance can then be used to fill any monthly income shortfall. Remember that the income from Family Income Benefit Insurance is all tax free.

•  When should the policy finish?
As Family Income Benefit Insurance is used to provide a monthly income to replace lost income upon death of one of the principle providers in the family, income is frequently provided for up to the date at which the policyholder would have retired in normal circumstances (i.e. the date at which the policyholder would no longer have an earned monthly income.) You can, of course, insure for a shorter period if you wish.

•  Do you want the income to be Index Linked?
An Index Linked policy will cost you more than a flat rate policy, but the real value of the monthly income will be maintained.

•  Does the policy need to insure against just your death or should it also provide cover in the event of your partners' death?
Joint policies can be useful as they provide cover for both policyholders. However they are often only 10 - 20% cheaper than two single policies. But remember that joint policies start paying out if one person dies - if the other person also dies, the monthly income does not increase. If your family needs income in respect of both death you should consider taking two single policies rather than a joint policy.

•  Do you wish to combine Family Income Benefit Insurance with another form of life insurance?
If you want a lump sum payment in the event of death then consider combining it with Life Insurance. Would you need a lump sum if you were diagnosed with a serious illness? Then consider combining it with critical illness insurance. If you would need an income if you were off work due to a long term illness or accident then consider taking out Income Replacement Insurance (which is also known as Permanent Health Insurance). Each form of insurance has a different key purpose and whilst it would be nice to take all of them, it is unlikely to be an affordable option. You'll need to consider your priorities.

• Can your family budget afford the monthly premium?
We suggest you resolve the preceding key issues and then get quotes for the options you're interested in. Then you can consider the cost. In any case, you can always take out some income cover now and then top it up (with another policy) at a later date.